South Africa’s poor economic performance is due to an insidious encroachment of over-regulation and state control, according to economist, Russell Lamberti.
And by numerous key measures, South Africa’s economy is failing miserably.
Lamberti, who is chief strategist at investment advisory firm ETM Analytics, noted that World Bank data shows that South Africa’s inflation-adjusted dollar-denominated GDP per capita stagnated from 2008 to 2014.
Over that period the same measure for Chile was up 17%, Malaysia 18%, Columbia 19%, and Botswana and Mauritius 21%.
Electricity production has fallen by 10% since the 2011 highs and is now at the same levels as it was at in 2003.
Manufacturing output is the same in 2015 as it was in 2005, as is construction activity. Road and rail freight tonnage has stagnated since 2011 and is down 6% since 2014, the economist pointed out.
“And worst of all, South Africa’s official unemployment rate remains extremely high at 25.5%,” Lamberti said.
“Rather than unleashing the creativity of the private sector, the incumbent party, the ANC, sees the state entirely as its own domain and the levers of policy as tools in a grand social engineering agenda,” the economist said in a research note published by trade union, Solidarity.
“This has left hugely important areas of the economy crippled, and as a result has damaged business and consumer confidence, deterred private sector investment, and seen to a renewed flight of skills from South Africa to abroad.”
Lamberti noted that at the opening of the ANC NGC Conference in October 2015, state president Jacob Zuma said things ‘that can only be seen as a candid and chilling admission of his party’s key objectives’.
“…we should know that we are powerful. We have got powerful allies. We are in every corner of this country. We carry the future of this country, with powerful allies. There’s nothing that must defeat us. There’s nothing that can stop us, in reality.” …not in the foreseeable future, even towards the end. So the movement forward – how fast we reach the destination is in our hands, because opposition is not there.”
The president took a swipe at the wealth-creators:
“Unemployment is a capitalistic phenomenon. You cannot have a situation [under capitalism] where there is everybody working…but we have worked on the laws to be also in favour of the working people…”
“In just 10 minutes of his two hour address, the president displayed everything that is wrong with state policy: a totalitarian desire for complete state control of the economy and a wish to hamper wealth creators and business owners,” Lamberti said.
He called the president’s attitude antagonistic, regressive, and economically perilous.
“In this we can see no desire for liberty and letting free agents reach mutually beneficial solutions in the market place.”
Zuma told party delegates that rather than reducing the state’s role in the economy – despite the current position of state owned entities including Eskom, SAA, and others – his government would look to strengthen and broaden the state’s role in the economy.
“As long as this is the case, South Africa is guaranteed to experience more economic stagnation and decline in the years ahead,” Lamberti said.
“If the South African state pursues a path to totalitarian socialism, South Africa’s economy is doomed.”
Instead, the economist said that South Africa needs to follow the example of its successful peers and establish firm protection for property rights and let wealth-creators freely decide where and how to deploy capital and who to hire on mutually acceptable terms.
“South Africa needs to reform the key areas of economic freedom by establishing firm property rights, fiscal discipline, industrial deregulation, labour market freedom, monetary prudence, freer trade, and a more open stance to domestic and foreign investors.
It is critical to limit the role of the state to merely that of a silent enabler of private enterprise,” Lamberti said.